CIMB Research keeps Buy rating on Prestariang

KUALA LUMPUR: CIMB Equities Research is maintaining its Buy call on ICT-based Prestariang and raised the target price from RM3.51 to RM3.89.
It said on Friday Prestariang’s FY13 full-year result was at 96% of its forecast but it was broadly in line with market and its market expectations.
“We believe the lower 4Q net profit was mainly due to the higher cost allocated to year-end staff bonuses and continued losses at UniMY. Ex-UniMY losses, FY13 net profit would have been 31% on-year higher.
“The proposed 1:1 bonus issue was a positive surprise and should boost stock liquidity. We raise FY14-15 EPS to reflect earnings from its oil & gas training business and add the FY16 EPS.
“We raise the target price based on an unchanged 14 times 2015 P/E – the sector’s P/E. We maintain our Add rating. Catalysts are securing more oil & gas jobs and strong UniMY student enrolments,” it said.
CIMB Research said although 2013 revenue growth was 8.4% on-year, net profit was 13.2% on-year higher(31% growth excluding UniMY’s RM6.6mil loss) as the higher profit-margin ICT training division was the largest revenue contributor in 2013.
The quarterly interim final DPS was 3 sen and the full year at 12 sen (63% payout ratio), versus its 11 sen forecast. The net cash balance was RM69.7mil or 32 sen net cash per share.
Prestariang’s proposed 1:1 bonus issue was a positive surprise as it should help boost the stock’s liquidity and make it more attractive to retail investors. Once it is complete the issued share base will grow to 440 million shares from 220 million.
“We expect more positive newsflow from Prestariang in the coming months, especially on developments in the oil & gas training business. Prestariang plans to start a major new oil & gas training school in Johor or Sarawak, focusing on welding, pipe-fitting and scaffolding skills. We have added potential earnings from this business to our forecast.
“Assuming the company starts full commercial operations at end-2014, this division should contribute 7 to 8 sen more of EPS (assuming it trains 3,000 students) in 2015. We have not reflected potential earnings if Prestariang secures the English training teachers contract from the Ministry of Education over the next few quarters,”  it  said.